Construction sector builds momentum
Wednesday 02 March 2011
The recovery in the construction industry strengthened in February as activity surged to an eight-month high, boosting hopes that the UK's economy will return to growth.
The latest Markit/CIPS Purchasing Managers' Index (PMI) survey for the construction sector - where a reading above 50 indicates growth - rose to 56.5 in February from 53.7 in January, as it continued to bounce back from the disruption caused by the snow in December.
There was a marked increase in housebuilding activity, which declined in the final four months of 2010, while civil engineering work grew at its fastest pace for three years and levels of commercial building work remained strong.
But the recovery in the construction sector is fragile and could be derailed by prices, which rose at their fastest rate since 2008, Government cuts and low levels of bank lending.
Some 53% of businesses said their costs increased since January, with prices of oil, fuel and steel showing particularly steep rises. Today's report echoes findings from the manufacturing sector where prices increased at near-record levels in February.
Levels of optimism about the future were weaker than January and the number of people employed continued to fall, the survey added.
CIPS chief executive David Noble said: "A weather-beaten UK construction sector is showing signs of repair, with stronger rates of activity and a rise in new business continuing the reversal of fortune since the end of 2010.
"The situation is still fragile considering the likely impact of Government cuts. Concern about the level of bank lending is also having a negative impact on confidence."
The figures suggest that the construction sector, which declined by 2.5% in the final quarter of 2010 and contributed to a 0.6% fall in GDP, should return to growth in the first quarter of 2011, said Sarah Ledger, report author and economist at Markit.
Howard Archer, chief economist at IHS Global Insight, said rising prices will put further pressure on the Bank of England to raise interest rates from their record low of 0.5%.
Construction was a significant driver of the UK's economic growth in the second and third quarters of 2010 but the difficulties now facing the sector mean it will not make a big contribution to the UK's economic growth for much of 2011, he added.
He said: "The construction sector does face a challenging environment and it is notable that sentiment in the sector slipped in February.
"Public spending cuts, still-tight credit conditions and a subdued housing market are particular problems for the construction sector. In addition, soaring input prices are squeezing construction companies' margins."
- 1 Nokia no more: Microsoft drops once-ubiquitous mobile name – in favour of its Lumia brand
- 2 Renee Zellweger on plastic surgery reports: 'I'm living a fulfilling life and I'm thrilled that perhaps it shows'
- 3 Banksy not arrested: Internet duped by fake report claiming artist's identity revealed
- 4 Australian café owner sparks debate after saying 'No' to having unruly children on premises
- 5 Couple die within 28 hours of each other after being married for 73 years
Ottawa shooting: Canadian soldier dies after being shot at National War Memorial – with one gunman killed inside parliament
Renee Zellweger on plastic surgery reports: 'I'm living a fulfilling life and I'm thrilled that perhaps it shows'
Isis releases first video showing the stoning of woman accused of committing adultery as her father shouts 'don't call me Dad'
Banksy not arrested: Internet duped by fake report claiming artist's identity revealed
Diwali 2014: What is the festival of lights and how is it celebrated?
Cameron is warned 'no possibility' of UK reducing immigration and that bid to bring in quota on migrant workers would be illegal
Of course, teenage girls need role models – but not like beauty vlogger Zoella
Residents should throw a street party and mix with immigrant neighbours, councils told
Russell Brand threatened with arrest after filming outside Fox News headquarters
Support for EU membership 'at highest level since 1991' with most Brits wanting to stay 'in'
London bus driver 'kicks gay couple off for kissing'
iJobs Money & Business
£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...
£18000 - £23000 per annum + Commission: SThree: The SThree group is a world le...
£18000 - £23000 per annum + Comission: SThree: The SThree group is a world lea...
£20000 - £25000 per annum + OTE £Competitive: SThree: SThree Group and have be...